Bill Allows Residents To Prepay Property Taxes In Montgomery Co.

MONTGOMERY COUNTY, MD — Montgomery County Council passed the Property Tax Advance Payment Tuesday, allowing residents to prepay their 2018 county property tax in 2017.

The measure was passed by a 7-1 vote in the council after President Donald Trump signed the federal Tax Reform Act on Dec. 22. The new plan caps state and local tax deductions at $10,000, and many are hurrying to pay the first installment of their upcoming property taxes before the end of the year.

The advance payment of 2018 property tax before the end of 2017 may be deductible for some taxpayers on their 2017 federal income tax return.

"My sole motivation when I first proposed protecting our residents and my sole motivation today in voting for this measure remains the same: we must do what we can to protect our people from the negative impact of this terrible Republican tax legislation," council member Roger Berliner said in a statement.

While some other jurisdictions permit prepayment of property taxes, Maryland law requires the County Council to pass a law before any prepayments can be accepted.

The bill requires the county to refund any amount paid that is greater than the property tax owed and would permit the county to bill the property owner for any amount of the prepayment that is less than the 2018 property tax once it is finally determined.

“Creating this prepayment option may open the door for many middle-class county residents to get a final year of benefit from deducting their property tax on their 2017 federal tax return,” council President Hans Riemer said. “Initial speculation was that only the most affluent residents could take advantage of this option. But with the benefit of public input, we now know that the prepayment option will be a potential benefit to thousands of county residents of more average means.”

Residents are encouraged to consult with their tax advisor to understand whether prepaying their 2018 property tax this year will benefit their tax situation. Montgomery County makes no representation as to whether the prepayment may be deducted for federal income tax purposes.

The IRS Wednesday issued some guidance about pre-paying and deductions:

The Internal Revenue Service advised tax professionals and taxpayers today that pre-paying 2018 state and local real property taxes in 2017 may be tax deductible under certain circumstances.

The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes. In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.

In Montgomery County, homeowners can prepay their property taxes by mailing their payment to the Department of Finance, Division of Treasury. Before mailing a payment, residents must print a Notice of Intent form located on the websites, fill it out, sign it, and mail it with their payment to the Treasury Office: 255 Rockville Pike, Suite L-15, Rockville, MD 20850.

Instructions on mailing can be found here.

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